Reader Survey Response:"In a sea of finance media, Cuffelinks stands a cut above the rest for its plain-English drafting and topical insights. Keep up the great work."

Reader Survey Response:"It is just right for me. I can quickly sort the items that I am interested in, then research them more fully. It is also a regular reminder that I need to get off my backside and do this."

Reader Survey Response:"Cuffelinks is excellent so please don't pollute the content with boring mainstream financial 'waffle' and adverts for stuff we don't want!"

Reader Survey Response:"I recommend Cuffelinks as the BEST in the game because of diversity and not aligned to financial products. Stands above all the noise."

Reader Survey Response:"Carry on as you are - well done. The average investor/SMSF trustee needs all the help they can get."

Reader Survey Response:"Congratulations on a great focussed news source. Australia suffers from a dearth of good quality "unbiased" financial and wealth management news sources."

Reader Survey Response:"I subscribe to two newsletters. Cuffelinks, this is my first read of the week. Thank you. Excellent and please keep up the good work!"

Reader Survey Response:"Love it, just keep doing what you are doing. It is the right length too, any longer and it might become a bit overwhelming."

Reader Survey Response:"Great resource. Cuffelinks is STILL the one and only weekly newsletter I regularly read."

Reader Survey Response:"An island of professionalism in an ocean of shallow self-interest. Well done!"

David Goldschmidt, Chartered Accountant:"I find this a really excellent newsletter. The best I get. Keep up the good work!"

Don Stammer, leading Australian economist:

"Congratulations to all associated with Cuffelinks. It deserves the good following it has."

John Egan, Egan Associates:
"My heartiest congratulations on an outstanding newsletter. Your panel of contributors is very impressive and continue to keep your readers fully informed."

Reader survey response:" Finding a truly independent and interesting read has been magical for me. Please keep it up and don't change!"

Reader Survey response:"Cuffelinks is one of very few places an investor can go and not have product rammed down their throat. Love your work!"

Eleanor Dartnall, AFA Adviser of the Year, 2014:

​"Our clients love your newsletter. Your articles are avidly read by advisers and they learn a great deal in so doing."

Reader Survey response:"Keep it up - the independence is refreshing and is demonstrated by the variety of well credentialed commentators. Allow the articles to be as long as needed to cover the topic."

Reader Survey response:"The best innovation I have seen whilst an investor for 25 years, particularly in superannuation. The writers are brilliant. A great publication which I look forward to every week."

Ian Kelly, CFP, BTACS Financial Services:"Probably the best source of commentary and information I have seen over the past 20 years – the last 15 as an adviser."

Ian Silk, Chief Executive, AustralianSuper:"Cuffelinks has become part of my required reading: quality thinking, and the writing is sharp and (mercifully) to the point."

John Pearce, Chief Investment Officer, Unisuper:"Out of the (many many) investment-related emails I get, Cuffelinks is one that I always open."

Noel Whittaker, author and Australia’s foremost financial adviser:"Cuffelinks is a fabulous weekly newsletter that is packed full of independent financial advice."

Andrew Buchan, Partner, HLB Mann Judd:"I have told you a thousand times the best newsletter is Cuffelinks."

SMSF trustees may lose insurance after super changes

The ‘Protecting Your Superannuation’ package, proposed in the 2018 Federal Budget, was passed earlier this year, and while the changes were designed to protect small superannuation balances, there may be significant implications for others. Many SMSF members, or others with large super balances, maintain smaller public offer accounts solely to access well-priced group life insurance. This legislation may place those life policies at risk unless members take action.

Super changes already legislated

The key changes in this legislation take effect from 1 July 2019, and are designed to limit the erosion of small balances in the following ways:

Fees will be limited to no more than 3% per annum for accounts with a balance of less than $6,000.

Exit fees on all super accounts will be banned to remove barriers to consolidation.

Insurance will be maintained on an opt-in basis for inactive accounts, defined as those that have not received a contribution in 16 months. Funds will be required to contact inactive members before 1 May 2019 to confirm whether they wish to maintain their existing cover.

Super trustees will also be required to transfer all inactive accounts with balances below $6,000 to the ATO, which will then strive to transfer these balances to the owner’s active superannuation account.

(Please note: The proposal to make insurance an ‘opt-in’ for those commencing a superannuation account under the age of 25, or with a balance of less than $6,000, was dropped from this legislation and will be proposed in a separate bill, which has not yet passed).

If you have been maintaining a small inactive superannuation fund for insurance purposes, it is likely this legislation will affect you. You may have your insurance policy cancelled, or, if your balance is below $6,000, your policy cancelled AND your balance transferred to the ATO. Neither of these outcomes is desirable if you are intentionally arranging insurance cover in an account separate from your existing active super balance.

Benefits of insurance through a large fund

If you have an inactive account, your superannuation fund should contact you soon requesting that you opt in to maintain your insurance cover. However you will need to ensure they have the correct mailing details etc in order to contact you. If you have not heard from your fund by 1 May, it is strongly advised that you contact them directly to confirm that you wish to maintain your cover, if you wish to do so.

The implications of having insurance cancelled can be significant. It is widely accepted that thousands of small superannuation accounts are maintained in the public system by SMSF trustees purely for insurance purposes.

Superannuation funds can hold life, total and permanent disablement and income protection policies on your behalf. Large funds are also generally able to access group policies that offer lower premiums than personal policies such as those you can access through an SMSF. Large super funds also often offer ‘automatic acceptance limits’, which allow you take out cover up to pre-specified limits without having to undergo personal underwriting, which may include medical tests and so on.

In the event your existing cover is cancelled, you may not be able to get new cover on the same terms. You may need to disclose medical conditions that have arisen since you originally applied, and have higher premiums or exclusions as a result, or you may no longer be eligible for cover at all through that fund. In many circumstances, particularly if you are older, or have poor health or a high-risk occupation, your existing policy may be the only insurance policy you hold. It may also be the only affordable insurance you are able to get.

Qualifying a fund as active

Insurance is critical if you have debt, dependents or rely on your income for your financial security. If that insurance is held in a super fund you’re not contributing to, you will need to consider whether to make the fund active, or at least ensure that the trustee of the fund knows you want it by opting in. Part of the new legislation lists actions that qualify a fund as active, which include making contributions, rolling funds into the account, changing investment options, making changes to your insurance or making a declaration to the ATO. If you’re not sure what you have, exactly, this could also present a great opportunity to review your insurance and ensure you have the cover you need.

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade, a sponsor of Cuffelinks. Any information in this publication is of a general nature only. It is not intended to be a substitute for specialised advice and nabtrade is not a registered tax agent.

4 Responses to SMSF trustees may lose insurance after super changes

As someone who can no longer be underwritten for any new life insurance, I have three of these public offer funds specifically for the insurance, as well as an SMSF where most of the money sits.

I contacted each fund to confirm what they need to mainatain a ‘active’ status. The Mercer fund nominated a contribution each 16 months. The IOOF fund said as long as i enquired each 16 months i would be ok. The Plum fund is my current corporate plan so is active.

To keep things simple, and so I don’t need to remember to do anything further, I set up a regular $5 monthly contribution to the Mercer and IOOF funds. Job done.

There will definitely be people who lose critical insurance via these changes. I have not had any communication about these changes from any of the 3 funds that i hold. 1st May is 10 days away, and everyone is on holidays.

Yet another example of why it is necessary for people to engage wth their super.

Ultimately it depends on the specific rules of each fund and insurance product involved. So be sure to read the fine print and/or get proper advice for your specific situation. But generally speaking it is quite OK to claim on multiple policies. The main area of restriction is with income protection. The overriding rule is not being able to claim more than about 75% of pre illness income in total across multiple income protection policies.